Wage growth in government sector being kept in check

Annual pay growth in the Swedish central government sector has been calculated at 3.5% during the first year (September 1998 to September 1999) of the sector's current collective agreement by the Agency for Government Employers, despite upward pressures on pay. At the end of May 2000, employers and trade unions in sector concluded a new cooperation agreement, aimed at improving bargaining procedures and wage formation.

In January 2000, the Agency for Government Employers (Arbetsgivarverket) conducted an enquiry among all central governmental authorities, excluding those with less than 50 employees, in order to examine the circumstances that may have influenced wage developments between September 1998 and September 1999. The total number of people employed in the sector is about 236,000. The mutual statistics used by the collective bargaining parties refer to 233,200 governmental employees as at September 1999, of whom 133,900 are men (57%) and 99,300 women.

The 1998-9 period examined by the Agency's study represents the first year of application of the central government sector framework collective agreement for 1998-2001 (Statens ramavtal 1998-2001, RALS), agreed in 1998. This agreement combines free local bargaining with a framework controlling the effects of this local wage formation. When the agreement was concluded, the central bargaining parties decided that the increase in total wage costs should be 9% over the whole three-year agreement period. The recent strong growth of the economy, with increasing employment and decreasing unemployment, has exerted a powerful pressure on wage formation.

Annual wage growth in the whole government sector (excluding the police force because of late timing of local agreements, and corrected for structural effects) is estimated to have been 3.5% in the year in question. Of this total, 3.2% was generated by local negotiations and 0.3% by increases distributed through other mechanisms. Wage growth varied in different parts of the government sector (see below) from 2.8% to 3.8%. The highest pay increase seems to have been in government services, county administrative boards and the government office (the cabinet) and the lowest in governmental business activities.

The Agency for Government Employers

The Agency for Government Employers was created when, in the mid-1960s, governmental employees were given the right to negotiate and conclude collective agreements on pay and general employment conditions. Since 1994, the government has delegated its responsibilities as an employer to the Agency. It acts on instructions from its members, which are all 250 public administrations in the government sector. The Agency's activities are no longer financed through government grants, but through through membership fees, set in proportion to the various public administrations' payroll expenditures. The 250 members are organised in nine sectors, each of which is represented by a sectoral delegation. The two largest sectors are legal authorities and national defence, with 65,000 employees (out of 236,000 governmental employees), and universities and research, with 60,000 employees.

The Agency for Government Employers summarised its views on wage developments in the state sector in a paper issued in early May 2000. The Agency is worried that the improved situation on the Swedish labour market has given rise to certain problems in recruiting new personnel in the state sector. The governmental authorities have experienced this bottleneck problem since 1999. Recruitment problems have concerned higher positions, information technology personnel and certain technicians. The need to recruit this kind of personnel may increase in the future, the Agency fears.

In 1999 the Parliamentary Auditors, which scrutinise national government activities, strongly criticised six large public authorities for their "generous" wage policies during 1993-9. For example, the National Road Administration (Vägverket) had given their employees annual pay increases of approximately 5% from 1996 onwards. The National Tax Board (Riksskatteverket), the National Audit Office (Riksrevisionsverket), the National Agency for Education (Skolverket), the Swedish International Development Cooperation Agency (SIDA) and the National Courts Administration (Domstolsverket) had also agreed with trade unions to pay increases above the recommended level of 3.6%. The authorities attributed these increases to factors such as market adjustments, rationalisations and ambitions to do away with pay differences between men and women.

New cooperation agreement

On 30 May 2000, a new cooperation agreement was concluded for the central government sector. The parties - the Agency for Government Employers and the trade unions represented in the Public Employees' Negotiation Council (Offentliganställdas Förhandlingsråd, OFR), the state section of the Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation, SACO-S) and the Union of Service and Communication (SEKO), representing blue-collar workers - have agreed to "make constructive negotiations easier in order to maintain industrial peace". Under the agreement, the parties will take full responsibility for wage formation. They have agreed a plan for pay negotiations that will improve the possibilities of reaching a new agreement before the old one expires. The parties will establish a "cooperation council", which will work towards realising at local level the agreements reached by the central bargaining parties during the bargaining round. The cooperation council will contain representatives from both central and local levels.

A "cooperation committee" with an impartial chair is to be established. It will follow the progress of negotiations and may, for example, decide that impartial counsellors should intervene and mediate between the parties if this is judged necessary for a solution to problems in the negotiations.

From 1 June 2000, the Co-Determination Act (medbestämmandelagen) has been amended to create a new Mediation Authority to mediate in labour conflicts and work towards satisfactory pay determination (SE9912110F). By registering agreements on bargaining procedures, the bargaining parties in a sector may follow their own agreed rules instead of the statutory rules on mediation. The new agreement for central government employment thus exempts the sector from the statutory provisions. There are similar agreements in the private industry sector (SE9703110N) and in local government (SE0006146N).

Commentary

The Swedish system of setting overall budgets gives most state employers very clear economic frameworks. Excessive pay increases within governmental authorities may directly influence the other activities of these authorities. The economic restrictions imposed by the government may also result in difficulties in recruiting new workers on a labour market that has already started to show signs of labour shortages. In the years to come, pay formation in the government sector will be tested by another "difficulty" that has not been very common since the end of the 1980s - an upward economic trend, with the workers wanting their share of the gains. Here the as yet untested new cooperation committee and council established by the new government sector cooperation agreement may play a very valuable part. (Annika Berg, Arbetslivsinstitutet)